Negotiating a Restaurant Lease

Here are the things a tenant needs in negotiating a good tenant’s lease:

1. A knowledge of the market rents for comparable restaurant space which can be obtained from a real estate broker.

2. A viable concept that will motivate the landlord to lease to the tenant.

3. A business plan that includes the following: a. operator/tenant’s resume, b. business financial information including financial projections for the new operation, (The landlord wants to make sure that the tenant has enough working capital to get him through his start up period with several months of reserve capital to weather any possible unanticipated negative events.), c. copy of the proposed menu, d. proposed remodeling plans and e. proposed hours of operation.

4. A financial package which should include:

a. a current personal financial statement,

b. two years most current tax returns,

c. a current credit report and

d. a list of at least three business and three personal references.

 

5. A past history of successful restaurant experience to include:

a. past menus,
b. financial statements,
c. customer testimonials (complimentary letters & comment cards)
d. the names, addresses and phone numbers of past landlords.

Here are the things a tenant needs for a landlord in negotiating a renewal of an existing lease on favorable terms for the tenant:

1. A past history with the landlord for being a good tenant in terms of meeting all of the terms and conditions of the lease including paying the rent and other occupancy expenses on time.

2. A knowledge of the market rents for comparable restaurant space.

3. In negotiating an existing lease the tenant should negotiate the lease as far in advance as possible from the expiration date of the lease. The closer the tenant waits to the expiration date of the lease the more difficult it could be for the tenant to negotiate favorable terms, as time increases usually rents increase. Also the landlord knows that if the tenant wants to continue his business at the same location, the landlord has an advantage over the tenant in the negotiating process. If the tenant waits to the end of the lease to negotiate lease extensions and if he can’t come to an agreement with the landlord, the tenant could be forced to relocate his business which could be economically prohibitive. However, if the tenant is in good standing with the landlord, the tenant will have some leverage with a landlord in renewing his lease. This is because most landlords would rather work with a known quantity than be at risk with a new tenant and with possibly no rental income during the period the old tenant leaves and the new tenant comes in.

Written by Steven Zimmerman - Restaurant Realty Company

Disclaimer: The information in our articles has been provided by Restaurant Realty Company in collaboration with Restaurants For Sale Online. Restaurant Realty Company and Restaurants For Sale Online assumes no responsibility for decisions made by buyers, sellers or other parties to any transaction. Information has been provided based on experience and research. The results of various articles and studies reflect such information. Restaurant Realty Company and Restaurants For Sale Online assumes no responsibility for pricing or recommendation of pricing to any of our users. If you are interested in buying a business, Restaurants For Sale Online, LLC recommends you do your own due diligence to verify the source of any information provided to you by a seller and/or intermediary. If you are interested in selling your business, Restaurants For Sale Online recommends you contact an intermediary that specializes in transactions similar to the respective business.

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